U.S. Navy Shipbuilding Plan $5 Billion Over Budget


By The Maritime Executive 2017-02-22 19:31:44

The U.S. Congressional Budget Office (CBO) has estimated that the cost of the Navy’s 2017 shipbuilding plan - an average of about $21 billion per year (in 2016 dollars) over 30 years - would be $5 billion higher than the average funding that the Navy has received in recent decades.

In November 2016, the fleet numbered 272 battle force ships, aircraft carriers, submarines, surface combatants, amphibious ships, combat logistics ships, and some support ships. The Navy’s goal, as stated in its 2017 shipbuilding plan, was to maintain a fleet of 308 battle force ships. Toward that end, the Navy would buy a total of 254 ships over the 2017–2046 period: 209 combat ships and 45 combat logistics and support ships. 

If the Navy adhered to its current schedule for retiring ships, it would meet the goal of 308 ships under the 2017 plan by 2021, and it would be able to maintain its inventory at that level or higher through 2028. After that, however, the fleet would fall below 308 ships. By the 2030s, the fleet would number fewer than 300 ships. 

In mid-December 2016, the Navy released a new force structure assessment, which called for building a fleet of 355 ships. 

In its current plan, the Navy assumes a 35- or 40-year service life for its large surface combatants despite the fact that, in the past, few of those ships remained in the fleet for longer than 30 years. 

The Navy estimates that buying the new ships specified in the 2017 plan would cost $509 billion (in 2016 dollars) over 30 years, or an average of $17.0 billion per year - slightly more than the amount that the Navy estimated the construction of new ships would be under its 2016 plan. 

Using its own models and assumptions, CBO estimates that those new ships would cost a total of $566 billion (in 2016 dollars) over 30 years, or an average of $18.9 billion per year. CBO’s estimates are higher because its estimating methods and assumptions regarding future ships’ design and capabilities differ from those that the Navy uses and because its treatment of growth in the costs of labor and materials for building ships is different from the Navy’s. 

The Navy’s shipbuilding plan reports only the costs of new-ship construction. It excludes other activities typically funded from the Navy’s budget account for ship construction such as refueling nuclear-powered aircraft carriers or outfitting new ships with various small pieces of equipment after they are built and delivered. That would, by CBO’s estimate, add $1.8 billion to the Navy’s average annual shipbuilding costs under the 2017 plan. 

If the Navy received the same average annual amount of funding (in constant dollars) for ship construction in each of the next 30 years that it received over the past three decades, the service would not be able to afford its 2017 plan. CBO’s estimate of $18.9 billion per year for new-ship construction under the Navy’s 2017 shipbuilding plan is 36 percent more than the historical average of $13.9 billion (in 2016 dollars) in annual funding for new-ship construction. 

CBO’s estimate of $20.7 billion per year for the full cost of the plan is 30 percent higher than the $15.9 billion the Navy has spent annually, on average, over the past 30 years for all activities funded by its shipbuilding account.